Off-plan property purchase means committing (usually financially) to buying a property that is yet to be constructed to completed. That hence means that you buy “the plan” and wait for the plan to be executed to completion.
Advantages of off-plan purchase
- In many cases of off-plan purchase, the cost ends up being lower compared to the purchase price of the completed unit. Hence, buying off-plan can save you on the investment capital.
- Off-plan arrangements usually come with extended payment plans- making it possible for people who otherwise would not have afforded the lump-sum purchase amount manage to acquire property.
Dis-Advantages of off-plan purchase
- The success of the project, including completion, quality and time of completion, mainly depends on the parties involved such as the developer. Cases of developers vanishing before completing their projects are not new.
- After knowing that what he is working on has already been bought, some developers may compromise on quality when striving to keep their costs low. This would be different in cases where the developer completes his projects to sell, since he knows that quality will count on securing a good market.
- In the rare occurrence that the property value declines, then the off–plan purchase price may end up being higher than the final disposal price.
If considering a off-plan purchase, its key you consider the following on top of other factors:
- Do a due diligence on the history of the developer and other parties e.g the contractor, property manager etc. Do they usually complete their projects and on time? Do they maintain quality?
- Consider well the location- reason being the rate of the property value appreciation (more so between the commitment time and project completion time) will be highly determined by where the property is.
- Make sure you get the contract, well signed and you understand it well. The need to keep it safe is self-explanatory.
- Consider you finances versus your priorities…….financial depressions can be real and in most cases they are not worth it.
- Keep monitoring the development progress and don’t ignore your gut feelings, at times they save.
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